Chevron Corporation CVX is speeding up expansion at the Tengiz oilfield in Kazakhstan to raise its output to around 1% of global crude supply. With this ramp-up process, Chevron is likely to complete the expansion by the end of February, four months earlier than expected. The $48 billion expansion, which started in January, indicates a pivotal development in the energy sector.
The first oil from the $48 billion expansion started flowing after the startup of Tengizchevroil’s (TCO) Future Growth Project (FGP). The recent expansion includes reducing wellhead pressures to facilitate faster production and increasing capacity for sour gas reinjection to maintain reservoir pressure. The recent expansion also aims to boost crude output by 260,000 barrels per day (b/d), bringing total production to nearly 1 million b/d by the second quarter of 2025. Despite delays and cost overruns, the company is committed to maximizing oil recovery. TCO’s crude oil production is expected to reach about 40 million tons per annum once all the facilities are working at full capacity.
Tengiz is Central Asia’s largest oil producer and the world’s deepest oil field,featuring the largest single-trap producing reservoir and an oil column measuring 1 mile. However, the Tengiz field, located along the Caspian seashore, faces a significant challenge of extremely high levels of hydrogen sulfide in the production stream.Chevron holds the operating interest of 50% in the Tengiz oilfield through the TCO joint venture, and its partners include Kazakhstan’s NOC, KazMunayGas holding 20%, ExxonMobil holding 25% and LukArco, a subsidiary of Russia’s Lukoil holding 5%.
Kazakhstan has persistently violated the production-curbing deal struck by the Organization of the Petroleum Exporting Countries and allies such as Russia —together known as OPEC+—by exceeding the oil production quota of 1.468 million b/d. The speedy expansion of the Tengiz oilfield will further make the matter worse,and as a result,Kazakhstan will miss its target of reducing oil production in line with the quotas agreed by the OPEC+ group.
However, Kazakhstan has committed to doing whatever is necessary to fulfill its obligations under the OPEC+ agreement and compensate for oil overproduction in 2024.
As Chevron ramps up production, the Caspian Pipeline Consortium (CPC) export route through Russia’s Black Sea port remains the primary channel for Tengiz exports. The company said that CPC will continue to be the main export route due to its reliability, despite all the geopolitical concerns and Kazakhstan's efforts to develop alternative routes. Chevron also informed that it has debottlenecked all the ongoing issues in the pipeline system to make it work effectively.
Houston, TX-based Chevron is one of the largest publicly traded oil and gas companiesthat participates in every aspect related to energy —from oil production to refining and marketing. Currently, CVX has a Zacks Rank #3 (Hold).
Investors interested in the energy sector might look at some top-ranked stocks like Mach Natural Resources LP MNR, Sunoco LP SUN and Gulfport Energy Corporation GPOR.While Mach Natural Resources and Sunoco currently sport a Zacks Rank #1 (Strong Buy) each, Gulfport Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Oklahoma-based Mach Natural Resources LP is an independent upstream oil and gas company that focuses on the acquisition, development and production of oil, natural gas and natural gas liquids reserves. The Zacks Consensus Estimate for MNR’s 2024 earnings indicates 179.17% year-over-year growth.
Dallas, TX-based Sunoco LP is a master limited partnership that deals with the distribution of motor fuel to roughly 10,000 customers, including independent dealers, commercial customers, convenience stores and distributors. The Zacks Consensus Estimate for SUN’s 2024 earnings indicates 184.11% year-over-year growth.
Gulfport Energy is an independent natural gas and oil company focused on the exploration and development of natural gas and oil properties in North America. The Zacks Consensus Estimate for GPOR’s 2024 earnings indicates 108.53% year-over-year growth.
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